Barclays Libor scandal: as it happened - June 28, 2012

David Cameron says Barclays has "serious questions to answer" over
Libor fixing and George Osborne describes the scandal as a "shocking
indictment" of the banks amid calls for the bank's chief executive Bob
Diamond to resign.

Every week it becomes increasingly incredible to me that there has not been a full public inquiry into the banking crisis. I don’t mean we need a witch-hunt after one or two individuals. But there is surely a need for us to understand properly the processes and actions of the individuals and companies who failed. It should involve cross-examining the UK’s top bankers, regulators and politicians of the time, in order that we (meaning Parliament and wider society) can get answers to the key questions: what exactly went wrong, and what do we want banks to do for us in the future?

16.43 European markets have shut down for the day, downbeat as expectations for a resolution at this week's EU summit fade.

The news first: an influential shareholder tells me investors may demand the resignation of Marcus Agius as chairman of Barclays.

The main reason, he says, is that the bank may need a cultural overhaul, and investors are not persuaded Mr Agius - who is also a non-executive member of the BBC's executive board - is the right individual to oversee this.

If that seems unfair, in that many would say the chief executive Bob Diamond is more responsible for the mess Barclays finds itself in, this investor would not necessarily disagree. But he feels that Diamond is in many ways an able chief executive, and replacing him will be much harder than finding a new chairman.

It’s fair to say Barclays shareholders are pretty shell-shocked today. The Libor scandal may have cost Diamond a few bob in terms of his bonus but big investors are nursing millions of pounds of losses from the plunging shareprice. Anger is mounting and they want answers. Here’s the first awkard question from the National Association of Pension Funds. The group has said in an email: “Institutional investors like pension funds should be concerned about whether the commitment to improved risk controls has any real meaning. Shareholders should also ask why the Board was apparently unable to carry out its oversight duties effectively.”

15.39 Damian Reece, the Telegraph's head of business, thinks that the "thick-skinned" Bob Diamond is unlikely to quit over the Libor scandal, but that the bank's shareholders may well end up forcing him out. Watch what Damian had to say here.

15.34 More on what Vince Cable had to say at the Business, Innovation and Skills committee:

There are last resort powers of director disqualification as you know, and we have many hundreds a year who are subject to that action.

If the facts suggested action - and obviously we would be subject to legal advice; this is a legal process - then indeed that could well follow. That certainly is a sanction open to us, yes.

But as we said at 15.18, he did say it is premature to decide what exactly should happen to Mr Diamond.

15.24 ITV's Laura Kuenssberg tweets that Barclays is in "intense conversations about what next":

&lt;noframe&gt;Twitter: Laura Kuenssberg - Whole situation moving fast so probably foolish to make any predictions at all-but clear Barclays in intense conversations about what next&lt;/noframe&gt;

15.18 Business Secretary Vince Cable is speaking in front of a parliamentary select committee this afternoon. Unsurprisingly, he was asked about Barclays. He described it as an "appalling scandal" that has caused "great damage" to the bank's reputation.

He added that Bob Diamond had a lot of questions to answer, but that it was premature to say what action the bank should take.

Peter Vicary-Smith, chief executive of Which?, said that if it can be proved that borrowers lost money because they paid artificially high interest rates on loans or mortgages then they should be compensated.

...

Mr Vicary-Smith said that four years on from the financial crisis there is “no evidence that the worst culture and practices in banking have changed at all”.

He said: “Once again another scandal highlights the corruption at the heart of our banking system, with no individuals held to account and senior bankers behaving as if they are above the law.

“The Government must now fast track plans to reform the industry and ringfence ordinary retail banking services from the toxic activities of their investment banking arms.”

14.58 Shadow chancellor, Ed Balls, has also weighed in on Barclays. He said:

In Britain, in America, around the world regulation wasn't tough enough, but tough regulation does not explain illegal market-fixing, duplicitous practices, that is what has happened here and I fear much more widely.

Executives in individual institutions were paid very, very high multi-million pound salaries and they were responsible for the organisations and the culture in those organisations. Now Bob Diamond, I am sure, is correct when says he didn't know, although he needs to set out exactly the detail of that, but on the wider question of culture it is important that figures like Bob are accountable for what happened and also persuade people that they can lead change in the future.

In the meantime, I have to say, as well as tougher regulation, surely it is time to repeat the bank bonus tax and use that for a youth jobs programme. The banks should pay for the mistakes they have made and they should put that to a social purpose.

The British bank is already named as a defendant in various class actions around the world, where investors are seeking compensation for buying financial instruments based on a Libor benchmark that was allegedly manipulated.

One of the biggest class-action claims has been filed in New York by the Mayor and City Council of Baltimore and the City of New Britain Firefighters and Police Benefit Fund.

Barclays is named as one of around 20 defendants, which also include Royal Bank of Scotland and HSBC, as well as US lenders Bank of America, Citigroup and JP Morgan. The action is co-ordinated with five other lawsuits, including a claim by discount brokerage Charles Schwab against 11 banks, including Barclays.

14.25 Barclays' share price is down more than 12pc at the moment and analysts are bracing themselves for billions of pounds in fines and damages across the sector. Sandy Chen, banking analyst at Cenkos Securities, said:

The cost of lawsuits related to the Libor rate scandal will likely dwarf the £290 million fine imposed on Barclays - and since Royal Bank of Scotland, HSBC and Lloyds Banking Group have also been named in lawsuits, we expect they will also face significant fines and damages. We are pencilling in multi-year provisions that could run into the billions.

Here's another graph showing Barclays' share price move today:

14.14 If you think £290m sounds like a lot, financial journalist Paul Lewis put it in context on Twitter earlier:

&lt;noframe&gt;Twitter: Paul Lewis - &lt;a href="http://search.twitter.com/search?q=Barclays" target="_blank"&gt;#Barclays&lt;/a&gt; &amp;#163;290 million total fine is 10 days' profit based on first quarter results.&lt;/noframe&gt;

14.02 The Telegraph's James Kirkup has tweeted a couple more comments from David Cameron:

&lt;noframe&gt;Twitter: James Kirkup - Cameron on Barclays: &amp;ldquo;People have to take responsibility for the actions and show how they&amp;rsquo;re going to be accountable for those actions"...&lt;/noframe&gt;

&lt;noframe&gt;Twitter: James Kirkup - Cameron on Barclays cont: "It&amp;rsquo;s very important that goes ***all the way to the top of the organisation**.&amp;rdquo; Are you listening, Bob Diamond?&lt;/noframe&gt;

13.40 George Osborne has finished speaking about Barclays now, so here's a recap of some of the main points:

- He described the FSA report as a "shocking indictment of the culture at banks like Barclays in the run up to the financial crisis". The "email exchanges between derivative traders and the Libor submitters working read like an epitaph to an age of irresponsibility. Through 2005, 2006, and early 2007, we see evidence of systematic greed at the expense of financial integrity and stability."

- The investigations beg three "vital questions": how were such failures allowed to continue undetected and unchecked; what changes are need to our regulatory system to prevent such abuse occurring again; what further investigations are required into the activities at Barclays, what sanctions are available and what questions must the chief executive answer

- He said the FSA was continuing its investigations into a number of financial institutions, in co-operation with regulators abroad. "It is already clear that the FSA's investigation demonstrates systemic failures at the heart of the financial system at the time," he added.

- As part of the review into Libor, the Chancellor said the Government was examining whether strengthening the criminal sanctions regime for abuse and market manipulation was warranted. He added that he was considering amendments to the Financial Services Bill that will ensure fines like the one slapped on Barclays will go to help the taxpaying public, not the financial industry.

- The number of people under investigation by the FSA was expected to increase and that it was in contact with the Serious Fraud Office.

- "It is clear that what happened at Barclays, and potentially other banks, was completely unacceptable, was systematic of a financial system that elevated greed above all other concerns and brought our economy to its knees," said Mr Osborne. he added that Bob Diamond faced "serious questions" and must reveal what he knew and when he knew it.

And here's a video clip of the Chancellor in action:

13.19 Labour MP Andy Love asks when the FSA is going to send out emails entitled "You're nicked, big boy". This is not suggestive of an informal approach to communications from the FSA, but is instead a reference to the emails between traders disclosed in the regulators' reports, such as: "Done...for you big boy". Others include:

Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger

13.06 Here's that missive from the British Bankers' Association that we mentioned at 12.57. The BBA runs Libor:

The British Bankers’ Association is shocked by yesterday’s report about LIBOR. The banks which contribute to the LIBOR rate must meet the necessary obligations to their regulators. The BBA has proactively co-operated with the authorities at every stage and will continue to work with the regulatory investigations into LIBOR, submitting information and making staff available for interview.

The current LIBOR review, with which our authorities are fully engaged, has been underway since March this year and is considering all aspects including the setting process. As part of this review we will now be asking the authorities to consider in what manner the LIBOR setting mechanism should be regulated in the future.

13.04 Barclays' shares have now tumbled around 15pc.

12.57 Another tweet from James Quinn, who has news of a missive from the British Bankers' Assocation:

&lt;noframe&gt;Twitter: James Quinn - I understand the BBA - which runs LIBOR - will publish a fuller statement immediately after Osborne has finished speaking&lt;/noframe&gt;

12.54 Here's a little more on what George Osborne said in relation to strengthening criminal sanctions for abuse and market manipulation:

Under the previous government's regime, fines paid to the FSA are used to reduce the annual levy other financial institutions are asked to pay.

I'm far from convinced in all cases this is the best use of the money and we are considering amendments to the Financial Services Bill that will ensure that fines are of this nature go to help the taxpaying public, not the financial industry.

I'm also going to ask my officials to urgently investigate whether this legislation could be applied to the fine imposed on Barclays Bank.

12.49 The Telegraph'sJames Quinn is listening to the Chancellor. He tweets:

12.45 Alistair Darling says that Libor now has to have some degree of independent supervision - that it "cannot be a work of fiction". He also reminds Mr Osborne that the FSA has the power to take those responsible "off the road".

12.38 The Chancellor said he would look at strengthening criminal sanctions for the FSA, which do not currently extend to manipulation of Libor.

12.37 Osborne says that Bob Diamond has "some very serious questions to answer", including what did he know and when did he know it.

12.35Osborne said it will be examined as to whether there are any gaps in criminal laws to deal with the Libor probe and that he expects the number of individuals under investigation to increase. He added that the Senior Fraud Office was aware of matters under investigation.

12.31Osborne says Barclays is not alone in the interbank lending rate probe and that Barclays and other banks were potentially in flagrant breach of proper market conduct.

12.27Osborne says that FSA report is a "shocking indictment of culture at banks like Barclays in run up to financial crisis". He said that the emails between traders read like an epitaph to an age of irresponsibility.

12.23 George Osborne on his feet now. Some of his comments to follow shortly...

12.19 The House of Commons Treasury committee wants to summon Bob Diamond for a grilling on events at Barclays. Downing Street has welcomed the decision, but said the issue was essentially one for the FSA to deal with. A Number 10 spokeswoman said:

It is right that Bob Diamond comes to Parliament, because clearly there are lots of important and very serious questions for him to answer. It is right that that should be done before a parliamentary committee.

Asked if Mr Cameron favoured an inquiry into the activities of bankers, the spokeswoman said:

This is essentially a regulatory matter. The Prime Minister is deeply concerned about this. We are doing a lot - and we have done much - to reform the regulatory system. Clearly this happened at a time when there was a light-touch view of regulation. Clearly, that hasn't worked and that is why this Government has already set in train tougher regulation.

12.13 Liberal Democrat president, Tim Farron, has fired a broadside at the last Labout government for a light-touch approach to regulation of the banking sector. Commenting on Barclays in an interview with Sky News he said:

If you allow people to be reckless, to be self-indulgent, and to behave in what could well be a criminal manner, these are the consequences.

Mr Farron pointed to Tony Blair and Gordon Brown as the main culprits for the current state of the financial sector, saying that their policy enabled banks to get out of control. He added:

You go back to a culture of impunity of reckless greed that was, I'm afraid, let off the leash in 1997 by the last Labour government which, if you like, out-Thatchered Thatcher when it came to the treatment of the financial sector, which has led to a culture which has been utterly appalling, and has crashed the UK and the European economy, and millions of people are suffering as a consequence.

12.10 Traders are making their feelings known on Barclays this morning. The bank's share price has taken a tumble, sliding more than 10pc. Here's a graph showing that decline:

12.06 And here's Andrew Tyrie, the Treasury select committee chairman, saying that bank regulators were "asleep on the job":

12.02 Political figures are lining up to fire shots at Barclays and/or regulation of the banks. We mentioned Lord Oakeshott's comments earlier and Lord Myners, the former City minister, has not minced his words either:

This is the most corrosive failure of moral behaviour I have seen in a major UK financial institution in my career.

I think fines and public criticism will not stop these behaviours. These behaviours will not stop until the people perpetrating it or responsible for overseeing them face the prospect of criminal charges and the prospect of going to jail.

11.58 There have been some more mutterings from the Government about Barclays. A spokeswoman for David Cameron has said that the Treasury and financial market regulator have discussed the potential criminal implication of an investigation into the manipulation of Libor rates.

When asked if there had been any consideration about whether the manipulation of Libor could have criminal implications, Mr Cameron's spokewoman told reporters:

The issue is something that has been under discussion - the liabilities and criminal aspects.

11.56 People further afield are keeping an eye on the unfolding scandal. Reuters reports that the EU Commission follows "the interest rate investigations closely".

11.51Ed Miliband, the Labour leader, has called for the "strongest punishment" for those responsible for the interest rate rigging scandal. He said earlier today:

This cannot be about a slap on the wrist, a fine and the foregoing of bonuses. To believe that is the end of the matter would be totally wrong. When ordinary people break the law, they face charges, prosecution and punishment. We need to know who knew what when, and criminal prosecutions should follow against those who broke the law. The same should happen here. The public who are paying the price for bankers' irresponsibility will expect nothing less ...We need the strongest punishment, a change in regulation and a change in the culture of our banks.

Libor stands for the London Inter-Bank Offered Rate and is the average cost of borrowing for banks, calculated daily. That average is taken as official Libor, which is used to price trillions of pounds of loans and financial products across the world. The rate is worked out by asking banks to submit their borrowing costs, discarding the top four and bottom four rates, and taking the average of the rest. There are, in fact, several Libor rates measuring the cost of borrowing for different lengths of time, of which three-month Libor is seen as the benchmark. Just to complicate matters, Libor is also calculated for different currencies of which Euribor, in euros, is one.

11.45 George Osborne is due to make a statement on the Barclays furore in the Commons just after midday. David Cameron has also spoken briefly this morning on the Barclays situation. When asked whether Bob Diamond should resign, he said:

I think the whole management team have got some serious questions to answer. Let them answer those questions first.

11.36 There is no suggestion that Bob Diamond or other executive directors knew what was going on at the bank. But nonetheless, Mr Diamond is coming under increasing pressure to step down. Here's what Lord Oakeshott, a former Liberal Democrat Treasury spokesman, had to say:

If Bob Diamond had a scintilla of shame, he would resign. If Barclays' board had an inch of backbone between them they would sack him.

11.31 The story so far is that Barclays has been fined £290m for trying to manipulate Libor. The London Interbank Offered Rate is used to fix the cost of borrowing on mortgages, loans and derivatives worth more than $450 trillion (£288 trillion) globally. Here's the Telegraph's banking correspondent, Harry Wilson, with some of the details:

Investigators from the FSA and the US Commodity Futures and Trading Commission said they had found evidence that Barclays had tried to manipulate Libor for several years in the run up to the financial crisis and in its aftermath.

...

Emails uncovered as part of a three-year investigation into claims that Barclays and other banks attempted to inflate and suppress Libor show the extent of the scandal.

In one message sent to a Barclays employee involved in the bank’s Libor submission, a trader asked for the rate to be set “as high as possible today”, to which the unnamed staff member replied “sure”.

In another, a trader from an unnamed rival bank thanks a Barclays trader for successfully getting the lender’s Libor rate lowered, saying: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.

About a dozen banks are being investigated as part of the Libor probe, including state-backed lenders Lloyds Banking Group and Royal Bank of Scotland, as well as many of the largest US and European investment banks.

11.30 Hello and welcome to the Telegraph's live coverage of the scandal engulfing Barclays after the bank was fined £290m for attempting to manipulate Libor, the world’s benchmark bank borrowing rate.